Encyclopaedia Britannica > Volume 19, PHY-PRO

POLITICAL ECONOMY 389
by Smith, who makes it to arise out of a native bent for truck or
barter; whilst its dependence on capital—on the labours and
accumulations of past generations—is not duly emphasized, nor
is the necessary counterpoise and completion of the division of
labour, in the principle of the national combination of labour,
properly brought out. Smith recognizes only material, not
spiritual, capital ; yet the latter, represented in every nation by
language, as the former by money, is a real national store of
experience, wisdom, good sense, and moral feeling, transmitted
with increase by each generation to its successor, and enables
each generation to produce immensely more than by its own
unaided powers it could possibly do. Again, the system of Smith
is one-sidedly British ; if it is innocuous on the soil of England, it
is because in her society the old foundations on which the spiritual
and material life of the people can securely rest are preserved in
the surviving spirit of feudalism and the inner connexion of the
whole social system—the national capital of laws, manners, reputa¬
tion, and credit, which has been handed down in its integrity in
consequence of the insular position of the country. For the
continent of Europe a quite different system is necessary, in which,
in place of the sum of the private wealth of individuals being
viewed as the primary object, the real wealth of the nation and the
production of national power shall be made to predominate, and
along with the division of labour its national union and concentra¬
tion—along with the physical, no less the intellectual and moral,
capital shall be embraced. In these leading traits of Muller’s
thought there is much which foreshadows the more recent forms
of German economic and sociological speculation, especially those
characteristic of the “ Historical ” school.
List. Another element of opposition was represented by
Friedrich List (1798-1846), a man of great intellectual
vigour as well as practical energy, and notable as having
powerfully contributed by his writings to the formation
of the German Zollverein. His principal work is entitled
Das Nationale System der Politischen Oekonomie (1841;
6th ed., 1877). Though his practical conclusions were
different from Muller’s, he was largely influenced by the
general mode of thinking of that writer, and by his stric¬
tures on the doctrine of Smith. It was particularly
against the cosmopolitan principle in the modern eco¬
nomical system that he protested, and against the absolute
doctrine of free trade, which was in harmony with that
principle. He gave prominence to the national idea, and
insisted on the special requirements of each nation accord¬
ing to its circumstances and especially to the degree of
its development.
He refuses to Smith’s system the title of the industrial, which
he thinks more appropriate to the mercantile system, and desig¬
nates the former as “the exchange-value system.” He denies
the parallelism asserted by Smith between the economic conduct
proper to an individual and to a nation, and holds that the
immediate private interest of the separate members of the com¬
munity will not lead to the highest good of the whole. The
nation is an existence, standing between the individual and
humanity, and formed into a unity by its language, manners,
historical development, culture, and constitution. This unity is
the first condition of the security, wellbeing, progress, and civiliza¬
tion of the individual; and private economic interests, like all
others, must be subordinated to the maintenance, completion, and
strengthening of the nationality. The nation having a continuous
life, its true wealth consists—and this is List’s fundamental
doctrine—not in the quantity of exchange-values which it possesses,
but in the full and many-sided development of its productive
powers. Its economic education, if we may so speak, is more
important than the immediate production of values, and it may
be right that the present generation should sacrifice its gain
and enjoyment to secure the strength and skill of the future. In
the sound and normal condition of a nation which has attained
economic maturity, the three productive powers of agriculture,
manufactures, and commerce should be alike developed. But the
two latter factors are superior in importance, as exercising a more
effective and fruitful influence on the whole culture of the nation,
as well as on its independence. Navigation, railways, all higher
technical arts, connect themselves specially with these factors;
whilst in a purely agricultural state there is a tendency to stag¬
nation, absence of enterprise, and the maintenance of antiquated
prejudices. But for the growth of the higher forms of industry
all countries are not adapted—only those of the temperate zones,
whilst the torrid regions have a natural monopoly in the pro¬
duction of certain raw materials ; and thus between these two
groups of countries a division of labour and confederation of powers
spontaneously takes place. List then goes on to explain his theory
of the stages of economic development through which the nations
of the temperate zone, which are furnished with all the necessary
conditions, naturally pass, in advancing to their normal economic
state. These are (1) pastoral life, (2) agriculture, (3) agriculture
united with manufactures; whilst in the final stage agriculture,
manufactures, and commerce are combined. The economic task of
the state is to bring into existence through legislative and admini¬
strative action the conditions required for the progress of the
nation through these stages. Out of this view arises List’s
scheme of industrial polities. Every nation, according to him,
should begin with free trade, stimulating and improving its agri¬
culture by intercourse with richer and more cultivated nations,
importing foreign manufactures and exporting raw products.
When it is economically so far advanced that it can manufacture
for itself, then a system of protection should be employed to allow
the home industries to develop themselves fully, and save them
from being overpowered in their earlier efforts by the competition
of more matured foreign industries in the home market. When
the national industries have grown strong enough no longer to
dread this competition, then the highest stage of progress has
been reached ; free trade should again become the rule, and the
nation be thus thoroughly incorporated with the universal indus¬
trial union. In List’s timej according to his view, Spain, Portugal,
and Naples were purely agricultural countries ; Germany and the
United States of North America had arrived at the second stage,
their manufactures being in process of development; France was
near the boundary of the third or highest stage, which England
alone had reached. For England, therefore, as well as for the
agricultural countries first-named, free trade was the right economic
policy, but not for Germany or America. What a nation loses for
a time in exchange values during the protective period she much
more than gains in the long run in productive power,-—the tempor¬
ary expenditure being strictly analogous, when we place ourselves
at the point of view of the life of the nation, to the cost of the
industrial education of the individual. The practical conclusion
which List drew for his own country was that she needed for her
economic progress an extended and conveniently bounded territory
reaching to the sea-coast both on north and south, and a vigorous
expansion of manufactures and commerce, and that the way to
the latter lay through judicious protective legislation with a customs
union comprising all German lands, and a German marine with a
Navigation Act. The national German spirit, striving after in¬
dependence and power through union, and the national industry,
awaking from its lethargy and eager to recover lost ground, were
favourable to the success of List’s book, and it produced a great
sensation. He ably represented the tendencies' and demands of
his time in his own country ; his work had the effect of fixing the
attention, not merely of the speculative and official classes, but of
practical men generally, on questions of political economy; and he
had without doubt an important influence on German industrial
policy. So far as’ science is concerned, the emphasis he laid on
the relative historical study of stages of civilization as affecting
economic questions, and his protest against absolute formulas, had
a certain value ; and the preponderance given to the national
development over the immediate gains of individuals was sound in
principle ; though his doctrine was, both on its public and private
sides, too much of a mere chrematistic, and tended in fact to set
up a new form of mercantilism, rather than to aid the contem¬
porary effort towards social reform.
Most of the writers at home or abroad hitherto mentioned
continued the traditions of the school of Smith, only-
developing his doctrine in particular directions, sometimes
not without one-sidedness or exaggeration, or correcting
minor errors into which he had fallen, or seeking to give
to the exposition of his principles more of order and
lucidity. Some assailed the abuse of abstraction by
Smith’s successors, objected to the conclusions of Ricardo
and his followers their non-accordance with the actual facts
of human life, or protested against the anti-social con¬
sequences which seemed to result from the application
of the (so-called) orthodox formulas. A few challenged
Smith’s fundamental ideas, and insisted on the necessity
of altering the basis of general philosophy on which his
economics ultimately rest. But, notwithstanding various
premonitory indications, nothing substantial, at least
nothing effective, was done, within the field we have as yet
surveyed, towards the establishment of a really new order
of thinking, or new mode of proceeding, in this branch of
inquiry. How, however, we have to describe a great and
growing movement, which has already considerably changed
the whole character of the study in the conceptions of